I don’t really think an investor should forget Amazonas if anyone could do it. Amazon has incredible future potential in e-commerce, artificial intelligence (AI) and much more. Amazon shares are up 31% this year and are currently the leading player in two of the world’s most important industries. Sixty-three of the 67 analysts involved rate Amazon’s stock a buy, with the other four rating it a hold.

However, the staggering gains investors have enjoyed in the past are unlikely to be repeated; Amazon is already a huge company, and whatever its potential, it has a huge base behind it. Doubling or tripling its business to current levels will take longer than in Amazon’s early days.

Investors looking for supercharged growth are more likely to find it in younger stocks with huge growth opportunities. If you are looking for a candidate for your portfolio, I have some ideas for you. Consider beauty elf (ELF -2.02%) And Revolution group (RVLV 0.56%)two young companies leveraging digital platforms to compete with industry leaders.

1. The new leader in cosmetics

The beauty industry has been dominated by a few giants for decades now, but the digital age is breaking down the hierarchy. Industry leader Estee Lauder has acquired luxury brands for years, concentrating its dominance, while L’OrealRevlon and a few others have been the biggest names in mass beauty, also buying up the competition to consolidate. They have created formidable competition and strong barriers to entry.

elf has carved out a niche for itself by focusing on digital and social media and creating an omnichannel strategy that speaks to its young target market. It’s still a small company compared to its larger counterparts, with a fraction of their sales, but it’s growing much faster than almost any other cosmetics brand today. It gained market share and moved from fifth to second place in terms of mass cosmetics brand market share from 2022 to the most recent quarter, and its skin care business grew 45%. at the same time as the entire sector. is up 1.2%.

In an economic context still under pressure, elf has demonstrated incredible resilience. Sales increased 50% year over year in the first fiscal quarter of 2025 (ended June 30) and gross margin increased 0.8 percentage points to 71%. Operating profit decreased, as did earnings per share (EPS), but both were positive and healthy, and management raised its outlook for revenue, operating profit and EPS for the full year.

Here’s how Amazon and Elf’s sales growth compares over the past four quarters:

Data source: Amazon and Elf quarterly reports. The elf districts are T1-25, T4-24, T3-24 and T2-24.

Part of the reason Elf’s profits have been weaker is due to the acquisition of a new skin care brand, Naturium, which already adds a lot to the business; this represents 16 percentage points of the first quarter’s sales increase. This is short-term pressure for long-term gain, and management expects EPS to increase for the full year.

Its profits have exceeded those of Amazon over the past three years:

AMZN Operating Profit (TTM) data by Y Charts.

elf is growing much faster than Amazon, but its shares trade at a one-year forward P/E ratio of 25, which is cheaper than Amazon’s 33. With elf in strong growth mode and plenty of market share to capture, elf stock could be an incredible addition to a growth-oriented portfolio.

2. Take over in fashion

Just as Elf leveraged its social media-based digital platform to become a leader in the beauty space, Revolve developed an artificial intelligence (AI)-based platform to become a serious contender in the beauty industry. fashion. She also has a strong social media presence and works with influencers and celebrities, and her all-digital business lends itself to profitability.

Like most retailers, it has struggled with inflation. It reaches a massive audience of fashion aficionados who are willing to pay top dollar for fashionable clothes, and who have reduced their purchases. But the tide could finally begin to turn.

Sales rose 3% year-over-year in the second quarter, the first year-over-year increase since 2022, and net profit more than doubled from last year. As usual, customer metrics tell the real story. Revolve continues to add active customers despite a challenging operating environment, with an increase of 5% year over year and average order value up 2%.

Part of these positive trends is due to a decrease in the return rate, which bodes well for the future. Management has made key strategic efforts to reduce the return rate while improving the shopping experience, such as improving size guidance and focusing personalization on merchandise least likely to be returned. The company has also developed an internal search function that generates higher sales at lower costs.

Revolve’s sales still represent only a fraction of the sales of clothing industry leaders like Gap And Nikeand as a smaller player whose trends are shifting in its favor, it has much more room to grow. As inflation moderates and interest rates rise, it is likely that it will begin to rise. It could also outperform as we get closer to the all-important holiday season.

Given that Revolve is under massive pressure in the current operating environment, one would have to go back to pre-inflation to see how it outperformed Amazon in better conditions:

AMZN revenue (annual) data by Y Charts.

You’d also have to imagine that he could go back, and now that revenues are picking up, it’s showing signs that it’s possible.

Renewable shares trade at a one-year forward P/E ratio of 36, slightly higher than Amazon. It’s only a good deal if you can imagine the potential a few years from now, and if you can, you might understand why it deserves that premium.